Correlation Between GigaMedia and AIR PRODCHEMICALS

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Can any of the company-specific risk be diversified away by investing in both GigaMedia and AIR PRODCHEMICALS at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining GigaMedia and AIR PRODCHEMICALS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GigaMedia and AIR PRODCHEMICALS, you can compare the effects of market volatilities on GigaMedia and AIR PRODCHEMICALS and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in GigaMedia with a short position of AIR PRODCHEMICALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of GigaMedia and AIR PRODCHEMICALS.

Diversification Opportunities for GigaMedia and AIR PRODCHEMICALS

0.62
  Correlation Coefficient

Poor diversification

The 3 months correlation between GigaMedia and AIR is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding GigaMedia and AIR PRODCHEMICALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIR PRODCHEMICALS and GigaMedia is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on GigaMedia are associated (or correlated) with AIR PRODCHEMICALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIR PRODCHEMICALS has no effect on the direction of GigaMedia i.e., GigaMedia and AIR PRODCHEMICALS go up and down completely randomly.

Pair Corralation between GigaMedia and AIR PRODCHEMICALS

Assuming the 90 days trading horizon GigaMedia is expected to generate 1.71 times less return on investment than AIR PRODCHEMICALS. But when comparing it to its historical volatility, GigaMedia is 1.18 times less risky than AIR PRODCHEMICALS. It trades about 0.03 of its potential returns per unit of risk. AIR PRODCHEMICALS is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  24,217  in AIR PRODCHEMICALS on September 23, 2024 and sell it today you would earn a total of  4,043  from holding AIR PRODCHEMICALS or generate 16.69% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

GigaMedia  vs.  AIR PRODCHEMICALS

 Performance 
       Timeline  
GigaMedia 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in GigaMedia are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, GigaMedia unveiled solid returns over the last few months and may actually be approaching a breakup point.
AIR PRODCHEMICALS 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in AIR PRODCHEMICALS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, AIR PRODCHEMICALS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

GigaMedia and AIR PRODCHEMICALS Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GigaMedia and AIR PRODCHEMICALS

The main advantage of trading using opposite GigaMedia and AIR PRODCHEMICALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GigaMedia position performs unexpectedly, AIR PRODCHEMICALS can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in AIR PRODCHEMICALS will offset losses from the drop in AIR PRODCHEMICALS's long position.
The idea behind GigaMedia and AIR PRODCHEMICALS pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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